This is the first part of a three-part series on Tax Computation: How to Compute for Percentage Tax. This series will help you understand the basics of taxation, particularly if you are registered as a percentage tax payer.

The Concept of Percentage Tax

This one is fairly simple. You pay 3% of your sales to the Bureau of Internal Revenue (BIR). There are no additional computations needed or other complexities that Value Added Tax (VAT) has.

Basically, you just add 3% to your revenues (Scenario A in spreadsheet). It is that simple. If you do not add the 3%, what will happen is that you will still have to remit the 3% to the BIR and it will be taken from your actual revenue (Scenario B in spreadsheet). Either one is OK and the choice is up to you. This, by the way, also applies to our article about computing for VAT.

Below is a spreadsheet that will help you understand the difference and how to compute for percentage tax.

 

Business Permits Registration and Renewal

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